Tax Planning Season: Some Suggestions for you

Hi All,

Here comes the second blog!

Few days back, I got a call from my friend. He was asking me about tax planning. He wanted to save some tax by doing some investment. I told him some options like ELSS, etc. After discussion I realized, does he have any idea where his money is going. And the honest answer is, he doesn’t know. Actually it is not his mistake. That is the problem many of us are facing. Because in our education system they don’t teach us what is money? What is Savings? What are investments? Theoretically we know all these terms. But the problem comes when we have to execute the plan. We don’t look at it practically.

Hey, I am not here to change the education system, though I intend to do that :-). But my political background is not that much strong. Anyways jokes apart. We will have to concentrate on this Learning part which requires some discipline from your side and some from my side also. So my sincere request to all of you is take at least 15 minutes of your precious time and read something to make yourself financially literate.

Now my discipline part includes that I should write good articles for all of you and yours will be to read it. Hey, one more thing I am not trying to teach you something. It is just that I have realized the importance of Financial Literacy. :-)

Bohot gyan ho gaya. Ab kaam shuru karte hain.

With the tax planning season about to start, we will have to discuss some tax planning things.

Here I am writing for section 80C

• Section 80C:

1. First calculate your yearly PF contribution.
2. Are you paying some LIC or other life insurance premiums (not medical insurance premium)? If yes you can add that also.
3. Are you doing some ELSS (Equity Linked Savings Schemes) investments? If yes add that also.

Now these are some common investment options everybody knows.
Following are some other options which are considered under section 80C:
1. Public Provident Fund
2. National Saving Certificate
3. 5-Year fixed deposits with scheduled banks
4. Principal component of home loan repayment

Now more specifically, where should you invest?

1. ELSS (Tax Saving Mutual Funds)
In ELSS, Your money will be locked for 3 years. But if you want to enjoy the participation in appreciation then take Dividend payout option.
While Investing, don’t look for just past one year performance. You need to focus on consistency. Which fund house is that? Is it reputed one like HDFC, Reliance, ICICI, Fidelity, SBI, Sundaram, etc…
Following are some good ELSS investment options:
1. SBI Magnum Tax Gain
2. Sundaram Tax Saver
3. ICICI Pru Tax Plan
4. HDFC Tax Saver

Now regarding Life Insurance Premium,
If you have not taken any risk cover, then you should take it at lower age. It will benefit in terms of the Mortality cost i.e. the cost you are paying to cover your life.
If you are going for ULIP i.e. Unit Linked Insurance Plan, take it for long term, you can plan your retirement by investing in ULIPs. But be careful, to which plan are going for? If the plan is charging heavily then don’t go for it. A Lot of Insurance agents are available in the market. BE CAREFUL. :-)

So, these are two main investment options for 80 C.

Other options are not looking that much lucrative in present scenario. But if you are very conservative Investor, then those are the best options for you. For those options not much of analysis is required. They are easily available.

So that’s it from my side for this discussion. If you have some queries feel free to reply.
Till that time,
Happy Tax Planning!

Regards,
Parimal.